How much more will Social Security recipients receive next year? COLA prediction offers insight
STATEN ISLAND, N.Y. — The tens of millions of Americans who receive Social Security benefits are bracing themselves for an even smaller bump in their monthly checks than what had previously been forecasted.
Each year, Social Security benefits are subject to an annual cost-of-living adjustment (COLA) based on inflation rates to ensure that monthly payments keep pace with rising costs.
Social Security recipients received a 3.2% COLA in 2024, a significant decrease from the 8.7% COLA in 2023, which was the largest increase in four decades.
For 2025, using current inflation data from the Consumer Price Index, it’s estimated there will be a 2.57% COLA in the coming year, according to The Senior Citizens League (TSCL).
The current projected 2.57% increase is lower than the 2.66% increase the group had forecasted last month and would be the lowest since 2020, when monthly benefits increased by just 1.3%.
Under the projected increase, beneficiaries who currently receive $2,000 in monthly benefits would see that number increase to $2051.40 in 2025.
The Senior Citizens League’s 2024 Senior Survey found that the overwhelming majority of respondents said that last year’s 3.2% COLA wasn’t enough to keep up with rising household costs, meaning a 2.57% increase next year could make matters even worse.
“Among the roughly 1,550 participants in TSCL’s 2024 Senior Survey, 69 percent said their household costs rose faster than the COLA last year, with costs for food and housing leading the way,” according to the TSCL.
Cost-of-living adjustments are determined using third-quarter data – July, August and September – from the Consumer Price Index for Urban Wage Earners and Clerical Workers.
Inflation for those three months is added together, averaged and then compared to the previous year’s third-quarter average, with the percentage difference between the current year and the previous year serving as the COLA rate for the upcoming year.
The Social Security Administration officially announces the annual COLA in October, meaning recipients need to wait a few more months before finding out exactly how much their benefits will increase.
In 2023, an average of nearly 67 million Americans per month collect Social Security benefits, totaling over $1 trillion dollars in benefits paid during the year, according to the SSA.
Social Security benefits represent about 30% of income for Americans aged 65 and older, the administration said.
POTENTIAL COLA CALCULATION CHANGE
New federal legislation is looking to change COLA calculations to better align benefits with the actual expenses experienced by seniors.
The Boosting Benefits and COLAs for Seniors Act, introduced by Rep. Ruben Gallego, D-Arizona, proposes changes to the calculation of the COLA for Social Security recipients.
If enacted, this bill would require the use of the Consumer Price Index for Americans aged 62 and older to determine the COLA, replacing the current use of the Consumer Price Index for Urban Wage Earners and Clerical Workers.
The proposed change aims to provide a more accurate reflection of inflation experienced by seniors, particularly in areas such as healthcare, food and housing. Advocates argue that the Consumer Price Index for Urban Wage Earners and Clerical Workers does not adequately capture the rising costs seniors face, leading to insufficient adjustments in Social Security benefits.
“It’s important that the COLA reflects how inflation impacts seniors so that we can pay our bills and our monthly Social Security checks stay strong,” said Roman Ulman, president of AFSCME Arizona Retirees Chapter 97.
The bill has garnered support from various organizations, including the American Federation of State, County and Municipal Employees, the Alliance for Retired Americans, and the American Federation of Labor and Congress of Industrial Organizations. Bob Casey, D-Pennsylvania, has introduced companion legislation in the Senate.
If implemented, this new calculation method could lead to increased monthly benefits for Social Security recipients, ensuring that their payments better align with the actual expenses they incur.